A study by Saurabh Bhargava and Vikram S. Pathania of Carnagie-Mellon and the London School of Economics, respectively, seems to demonstrate that talking on your phone while driving does not make you more likely to crash. Unless you close your eyes to talk or something.

The study leverages the fact that cell phone usage goes up measurably after 9PM when rates go down. Despite this increase in cell phone conversations, many of which take place while driving (they found that 81% of cell phone users admit to talking on the phonw while driving), the rate of accidents did not increase accordingly.

A number of the explanations why seem remarkably common-sensical:

One thought is that drivers may compensate for the distraction of cellphone use by selectively deciding when to make a call or consciously driving more carefully during a call.

That seems like a reasonable guess. I've let calls go to voice mail when I've been barreling downhill on ice, with bald tires, a trailer full of gravel, though heavy rush hour traffic myself.

Some of the conclusions are a bit peculiar:

Alternatively, it could be that risk-loving drivers may treat cell phones as a substitute for other, equally debilitating, distractions...

Which I personally don't buy, as talking on a cell phone isn't exactly the sort of thrilling driving behavior that would satisfy someone with a lust for doing stupid things in cars.

The study also suggests that most cell phone use-banning laws don't have much of an effect at all. They're not saying cell phone use is totally harmless, however:

We note that this research does not imply that cell phone use is innocuous. It simply implies that current cellular use by drivers does not appear to cause a rise in crashes. It is possible that drivers who use such devices compensate for the added distraction by driving more carefully.

The study concludes

In the least, we believe our findings should renew interest in empirical research examining the effects of cell phone use and reopen discussions on the costs and benefits of policy restricting such use. One direction of future research, which may prove particularly important to policy makers, is to investigate whether the influence of cellular use differs across types of drivers and driving conditions.

Overall, it seems a pretty reasoned and rational look at something that usually gets treated with all-or-nothing hysterics.